(Updates with additional CEO comments; adds details,
background)
By A.D. Pruitt
DOW JONES NEWSWIRES
As MGM Resorts International (MGM) continues to see a profit
drain related to a weak tourism and business environment in Las
Vegas, the company's chief executive says declines in gaming in Sin
City have hit a bottom this year.
Although gaming executives touted last year that declines in
room rates and occupancy at casino resorts were stabilizing,
conditions continued to deteriorate as unemployment mounted amid a
brutal recession. This forced gamblers and tourists to continue to
cut back spending on discretionary activities, particularly on
gambling and glitzy vacations.
"It was worse last year," CEO Jim Murren said in an interview
Wednesday, adding a "bottom is happening this year." He said a
stronger recovery in Las Vegas last year was elusive given that
consumers continued to pull back on spending. "Las Vegas has lagged
the U.S." recovery, he said.
Murren expects activity will be robust during the first quarter
of 2011 because of strong booking for conventions, which were
severely curtailed during the downturn as corporate travel waned.
He also said that October showed marked improvement for MGM's
convention bookings in Las Vegas.
Nonetheless, casino operators are still struggling to turn the
odds in their favor in Las Vegas. The company reported Wednesday
that its third-quarter loss narrowed amid sharply lower write-downs
related to its struggling Las Vegas City Center complex. The
company posted a combined $357 million in write-downs tied to the
City Center complex and the planned sale of its 50% stake in the
Borgata Hotel Casino & Spa in Atlantic City, N.J. A year
earlier, City Center-related write-downs were $1.17 billion.
MGM and Dubai World, joint owners of the massive City Center
casino complex opened last December, are still scrambling to figure
out how to fix the $8.7 billion project's financial problems. They
have studied closing two of the site's three hotels, according to
The Wall Street Journal, and have outlined a plan to seek relief on
terms of the complex's $1.8 billion loan. If the terms can't be
renegotiated, City Center could be in default as soon as the middle
of next year.
During an earnings call Wednesday with analysts and investors,
Murren said the company is currently exploring refinancing
opportunities and the debt should be reconciled in short order.
"The bond market is very hot. The bank market, and in real
estate in particular, is very strong, and there's a high degree of
interest in participating in a new facility, a new debt structure,
at City Center," Murren said during the call. "We think this is not
only imminently doable, but it won't take long," he said, adding
that "we want to get something done hopefully by the end of the
year."
Analysts said such upbeat comments about the City Center loan
and improving business in Las Vegas fueled the company's stock
price 8.6% higher to $12.10 in recent trading.
Between Jan. 1 and Sept. 30, MGM reported, City Center had a net
loss of nearly $1 billion, including $600 million in write-downs.
Meanwhile, revenue at most of MGM's other casinos weakened this
year.
The company reported a third-quarter loss of $318 million, or 72
cents a share, compared with a prior-year loss of $750.4 million,
or $1.70 a share. Write-downs totaled 51 cents and $1.72,
respectively.
Net revenue increased 1.6% to $1.72 billion as casino revenue
dropped 9.4%. But excluding reimbursed costs, revenue mainly
related to the company's management of City Center, net revenue
fell 3%.
The company last month said revenue per available room, an
important lodging industry measure of performance, fell 2% at its
Las Vegas Strip properties amid lower occupancies and flat average
daily rates.
-By A.D. Pruitt, Dow Jones Newswires; 212-416-2197;
angela.pruitt@dowjones.com
(Tess Stynes contributed to this article.)